RBS cuts rates as Funding for Lending scheme kicks in
The Royal Bank of Scotland is using the Bank of England’s funding for lending scheme to cut mortgage rates for first-time buyers and landlords.
Details of the Bank scheme were unveiled earlier this week with the aim of providing banks with up to £80bn of cheap loans to pass on to customers in the form of business loans and mortgages.
In response RBS is cutting rates on a direct-only fee-free five-year fixed rate deal at 90 per cent LTV from 6.49 per cent to 4.79 per cent which is also available at 95 per cent LTV using the government’s NewBuy scheme at the same rate as previously.
The bank is also launching a 3.49 per cent two-year fixed or tracker buy-to-let deal at 60 per cent LTV that is available through brokers.
However, while welcoming the scheme RBS also warns that lower rates will help but may not boost first-time buyer numbers due to underlying problems of demand and economic uncertainty.
RBS consumer economist Fionnuala Earley says the funding for lending scheme should help first-time buyers in principle.
But she says: “The issue is still that it is quite expensive for first-time buyers to get into the market and it’s not just because of mortgage rates and how much income it takes up. It is also about the deposit needed and the uncertainty they feel about what’s happening to the market now.
“It is a step in the right direction but there are still a few obstacles in the way. If we can get first-time buyers back into the market then the multiplier effect they have can get the market moving.”
Earley says that demand is weak and it is not just down to deposits but high inflation and squeezed incomes across the UK.
HSBC has already ruled itself out of using the Funding for Lending scheme preferring to use deposits to fund its mortgages.